Question 1

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that foreign nations gain an unfair advantage in the silicon-chip market because they exploit their workers by paying low wages, they are using the:

Accepted Answer

A)   environmental standards argument.
B)   infant industry argument.
C)   cheap foreign labor argument.
D)   national security argument.

Question 2

A direct restriction on the quantity of an import is called a(n) :

Accepted Answer

A)   quota.
B)   tariff.
C)   import subsidy.
D)   import restriction.

Question 3

A tariff imposed on U.S. imports into Japan tends to:

Accepted Answer

A)   penalize U.S. producers and benefit Japanese producers.
B)   benefit U.S. producers and penalize Japanese producers.
C)   penalize both U.S. producers and Japanese producers.
D)   benefit both U.S. producers and Japanese producers.

Question 4

Which of the following statements is true?

Accepted Answer

A)   Nations have generally moved toward freer international trade policies over the past few decades.
B)   Nations all over the world have recently raised trade barriers.
C)   Eastern Europe and the Former Soviet Union countries have reduced trade in the last couple of decades.
D)   NAFTA lowered trade barriers between the United States and Mexico but raised them between the United States and Canada.

Question 5

Suppose that there are only two countries in the world, Heartland and Soulland. The two countries produce only two goods, corn and drill presses. At its current level of production, Heartland must give up production of 1/4 drill press to produce an additional 100 bushels of corn. Soulland must give up 1 drill press to produce an additional 100 bushels of corn. No trade now occurs between the two economies, and both economies are operating on their respective production possibilities frontiers.
-(Exhibit: Heartland and Soulland)  The country with a comparative advantage in the production of corn is:

Accepted Answer

A)   Heartland.
B)   Soulland.
C)   neither; they both use the same technology.
D)   neither; they both use the same amount of resources.

Question 6

If Britain, at the point where it is currently producing, must give up the production of 75 hats to produce 25 additional sweaters, the opportunity cost of producing 4 sweaters is _______ hats.

Accepted Answer

A)   4
B)   12
C)   71
D)   79

Question 7

An argument against the use of tariffs to keep out the production of "cheap" foreign labor is that:

Accepted Answer

A)   wage rates and labor productivity are directly related.
B)   product prices and labor costs are unrelated.
C)   there is no significant relationship between labor productivity and wage levels.
D)   they don't work.

Question 8

-(Exhibit: Production Possibilities Curve)  To move from point B to point C, _______ must be ________ to produce _______ .

Accepted Answer

A)   3,000 drill presses; given up; 2,000 additional tractors
B)   8,000 drill presses; given up; 8,000 additional tractors
C)   3,000 tractors; produced; 2,000 additional drill presses
D)   8,000 drill presses; produced; 6,000 additional tractors

Question 9

Opportunities created by trade are a result of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 10

The expression "gains from trade" refers to:

Accepted Answer

A)   the net benefits a country receives from trade.
B)   a nation's surplus of exports over imports.
C)   a nation's balance of trade.
D)   the benefits a country receives from quota protection.

Question 11

If the United States imposes a quota on French wines, the result in the short run is likely to be ________ profits for American wine producers and ________ profits for French wine producers.

Accepted Answer

A)   lower; lower
B)   lower; higher
C)   higher; lower
D)   higher; higher

Question 12

-(Exhibit: Production Possibilities Schedule for Two Commodities)  Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated. Further assume that the only input is labor and that it remains fully employed. We see from the table that the United States:

Accepted Answer

A)   has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity X.
B)   has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity Y.
C)   does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity X.
D)   does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity Y.

Question 13

In the importing country, the most likely effect of a tariff on a good is to:

Accepted Answer

A)   raise the price and decrease the quantity demanded.
B)   raise the price and increase the quantity demanded.
C)   raise the price without affecting the quantity demanded.
D)   decrease the quantity supplied.

Question 14

Free trade is generally harmful because it reallocates world resources.

Accepted Answer

A) True 
 B)False

Question 15

Free trade is harmful because it leads to increased competition.

Accepted Answer

A) True 
 B)False

Question 16

-(Exhibit: Production Possibilities Schedule for Two Commodities)  Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated. Further assume that the only input is labor and that it remains fully employed. We see from the table that Canada:

Accepted Answer

A)   has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity X.
B)   has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity Y.
C)   does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity X.
D)   does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity Y.

Question 17

An example of a voluntary export restriction is a:

Accepted Answer

A)   U.S.-imposed limit on the total number of Honda automobiles imported from Japan.
B)   regulation specifying that each imported Honda automobile must meet certain emission-exhaust guidelines.
C)   decision by Japan to ship fewer Japanese-built Hondas to the United States.
D)   tax of 10 percent of the value of each Honda automobile imported from Japan.

Question 18

Most nations all over the world have raised trade barriers over the past decade.

Accepted Answer

A) True 
 B)False

Question 19

-(Exhibit: Production Possibilities in Alphaland and Omegaland)  Which of the following statements is true?

Accepted Answer

A)   Alphaland has an absolute advantage in the production of computers.
B)   Omegaland has an absolute advantage in the production of cars.
C)   A nation that can produce all goods with an absolute advantage would not benefit from trade.
D)   Because absolute advantage is determined by the amount of output per worker, it is not possible to determine if either country has an absolute advantage without more information.

Question 20

In general, trade restrictions penalize domestic producers and foreign consumers.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Markets

Correct Answer
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Opportunities created by trade are a result of comparative advantage.

Correct Answer
verified

If Britain, at the point where it is currently producing, must give up the production of 75 hats to produce 25 additional sweaters, the opportunity cost of producing 4 sweaters is _______ hats.

Correct Answer
verified

An argument against the use of tariffs to keep out the production of "cheap" foreign labor is that:

Correct Answer
verified

Correct Answer
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-(Exhibit: Production Possibilities Curve) To move from point B to point C, _ must be to produce _ .

Correct Answer
verified

A tariff imposed on U.S. imports into Japan tends to:

Correct Answer
verified

Correct Answer
verified

If the United States imposes a quota on French wines, the result in the short run is likely to be profits for American wine producers and profits for French wine producers.

Correct Answer
verified

The expression "gains from trade" refers to:

Correct Answer
verified

In general, trade restrictions penalize domestic producers and foreign consumers.

Correct Answer
verified

Most nations all over the world have raised trade barriers over the past decade.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that foreign nations gain an unfair advantage in the silicon-chip market because they exploit their workers by paying low wages, they are using the:

Correct Answer
verified

In the importing country, the most likely effect of a tariff on a good is to:

Correct Answer
verified

Free trade is generally harmful because it reallocates world resources.

Correct Answer
verified

Free trade is harmful because it leads to increased competition.

Correct Answer
verified

-(Exhibit: Production Possibilities in Alphaland and Omegaland) Which of the following statements is true?

Correct Answer
verified

A direct restriction on the quantity of an import is called a(n) :

Correct Answer
verified

An example of a voluntary export restriction is a:

Correct Answer
verified

Exam 17: Financial Markets

Correct AnswerverifiedShow Answer

Opportunities created by trade are a result of comparative advantage.

Correct AnswerverifiedShow Answer

If Britain, at the point where it is currently producing, must give up the production of 75 hats to produce 25 additional sweaters, the opportunity cost of producing 4 sweaters is _______ hats.

Correct AnswerverifiedShow Answer

An argument against the use of tariffs to keep out the production of "cheap" foreign labor is that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-(Exhibit: Production Possibilities Curve) To move from point B to point C, _______ must be ________ to produce _______ .

Correct AnswerverifiedShow Answer

A tariff imposed on U.S. imports into Japan tends to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the United States imposes a quota on French wines, the result in the short run is likely to be ________ profits for American wine producers and ________ profits for French wine producers.

Correct AnswerverifiedShow Answer

The expression "gains from trade" refers to:

Correct AnswerverifiedShow Answer

In general, trade restrictions penalize domestic producers and foreign consumers.

Correct AnswerverifiedShow Answer

Most nations all over the world have raised trade barriers over the past decade.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that foreign nations gain an unfair advantage in the silicon-chip market because they exploit their workers by paying low wages, they are using the:

Correct AnswerverifiedShow Answer

In the importing country, the most likely effect of a tariff on a good is to:

Correct AnswerverifiedShow Answer

Free trade is generally harmful because it reallocates world resources.

Correct AnswerverifiedShow Answer

Free trade is harmful because it leads to increased competition.

Correct AnswerverifiedShow Answer

-(Exhibit: Production Possibilities in Alphaland and Omegaland) Which of the following statements is true?

Correct AnswerverifiedShow Answer

A direct restriction on the quantity of an import is called a(n) :

Correct AnswerverifiedShow Answer

An example of a voluntary export restriction is a:

Correct AnswerverifiedShow Answer

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-(Exhibit: Production Possibilities Curve) To move from point B to point C, _ must be to produce _ .

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Correct Answer
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Correct Answer
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If the United States imposes a quota on French wines, the result in the short run is likely to be profits for American wine producers and profits for French wine producers.

Correct Answer
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Correct Answer
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Correct Answer
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